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One Job “Created,” Another Destroyed

2 min readBy: Xander Stephenson

Today, President Obama called on Congress to pass $5 billion in energy manufacturing credits, once again urging Congress to borrow and spend because, as he put it, "There aren't enough taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. credits to go around."

Taxpayers should take note that last August, the federal government picked out a group of politically favored energy programs and funneled $2.4 billion in government grants to them, yet job creation nationwide is weak at a post-recessionA recession is a significant and sustained decline in the economy. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years. time when it would normally be strong.

The President pointed with pride to what he called the success of last August's giveaway. "We received 500 applications requesting over $8 billion in tax credits. But we only had $2.3 billion to invest. In other words, we had almost four times as many worthy requests as we had tax credits." The President seemed to think his audience would be impressed that when the government offers free money, many companies will ask for it.

On a tour yesterday to view the results of this spending he spoke in front of employees of Smith Electric Vehicles in Kansas City, MO, and pointed out that "There is a thriving enterprise here instead of an empty, darkened warehouse."

The problem with these initiatives is that it is very easy to point to a few visible jobs that are created by a big government spending program and to brand the program a success. It takes candor to admit that by diverting billions of dollars into these targeted companies, jobs are lost or destroyed elsewhere in the economy.

Furthermore, when the government's political priorities change, causing it to pull preferential funding for pet projects, one of two things can happen: either the unsustainable government-created jobs will be destroyed; or the industry will thrive without the funds, proving in most people's eyes that they could have succeeded without the government funds in the first place.

Under President Bush, hydrogen car technology was given preferential treatment whereas Obama has slashed money from that project to concentrate funds on his favored high-tech companies. The to and fro of funds from project to project continually misallocates capital for political reasons, and it demonstrates that both parties arrogantly think the government can "create jobs" and knows better than the market where investment should flow. We need leaders with more humility and candor about the economy and government's limited ability to steer it.